Long-Term Performance Following Rights Issues and Open Offers in the UK

32 Pages Posted: 1 Mar 2007

See all articles by Proches Ngatuni

Proches Ngatuni

Open University of Tanzania

John Capstaff

University of Strathclyde - Strathclyde Business School

Andrew P. Marshall

University of Strathclyde - Strathclyde Business School

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Abstract

This study finds evidence of significant long-term underperformance following rights issues made during 1986-95 in the UK. The findings are resilient to a number of methodological controls. In contrast, our results for a smaller sample of open offers made during 1991-95 show strong positive performance over a 5-year post-issue period, implying that firms making open offers had better growth prospects than firms making rights issues. During 1986-90, a period when open offers were rarely used, firms appeared to be making rights issues to exploit overvaluation. However, this was not evident for rights issues made during 1991-95, a period when open offers were more commonly used.

Suggested Citation

Ngatuni, Proches and Capstaff, John and Marshall, Andrew P., Long-Term Performance Following Rights Issues and Open Offers in the UK. Journal of Business Finance & Accounting, Vol. 34, No. 1-2, pp. 33-64, January/March 2007, Available at SSRN: https://ssrn.com/abstract=966487 or http://dx.doi.org/10.1111/j.1468-5957.2006.00653.x

Proches Ngatuni

Open University of Tanzania ( email )

Faculty of Business Management
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John Capstaff (Contact Author)

University of Strathclyde - Strathclyde Business School ( email )

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United Kingdom
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0141 5523547 (Fax)

Andrew P. Marshall

University of Strathclyde - Strathclyde Business School ( email )

100 Cathedral Street
Glasgow G4 0LN
United Kingdom
44 0141 548 3894 (Phone)

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